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Cyber and Data Security Incidents, Related Losses on Rise
Monday, July 7, 2014 6:30 AM

Cyber liability exposures continue to evolve, and credit unions can no longer rely solely on their information technology staff to ward off a cyber-attack. Network security now requires solid governance and oversight with active participation by management and the board of directors, according to Jay Isaacson, vice president of commercial products for the CUNA Mutual Group.

Isaacson says data breaches are increasing across all businesses, resulting in significant dollar losses and reputational damage. He cites the Verizon 2014 Data Breach Investigation Report, which indicated 1,367 data breaches occurred in 2013, with 465 involving the finance industry.

And the price tag is high. In May, the Ponemon Institute reported in its Cost of a Data Breach Study, the average total cost of a data breach was $3.5 million, with a global average cost of $145 for each lost or stolen record containing sensitive and confidential information.

“Think of your own credit union and do the math. While a data breach might seem somewhat remote, it’s within the realm of possibility and could threaten the safety and soundness of your institution,” Isaacson suggests.

Within the financial sector, the most common security breach incidents involved Web application attacks, denial of services (DDoS) attacks, payment card skimming and insider misuse, according to the Verizon study. While financial gain motivates most data breach perpetrators, cyber espionage is also increasing. He said the most common sources of data breaches are hacking, followed by malware.

Specific to credit unions, Isaacson says the most common cyber claim themes reported to CUNA Mutual Group under its Cyber & Security Incident insurance coverage involved DDoS, third-party service providers, employee errors and lost or stolen devices.

“Network security is only as strong as the weakest link. You may have an air-tight data system, but if a third-party provider you use is lax, or a laptop containing confidential data goes missing, your credit union is at risk,” he cautions.

Isaacson says risk management considerations include education and training for all employees (not just IT staff); development and frequent testing of an incident/breach response plan; and the creation of a data security incident response team. Member education is also important.

“There’s a need to balance security and convenience. Members need to understand why certain security measures they might not consider convenient are necessary for their protection and the credit union,” he adds.

He also encourages credit unions to consider transferring some of the risk to a cyber-liability insurance policy. The two main components of a good cyber liability policy include expense coverage to assist in managing and mitigating a data breach and liability coverage to protect against related lawsuits.

Isaacson recommends credit unions to consider the following questions to help determine their level of preparedness for cyber-attacks:

  • Does your credit union have an Incident/Breach Response plan?
  • Do you have access to the necessary level of internal and external expertise to manage through a breach (IT Professionals/PR/Legal Counsel)?
  • Does your credit union understand the notification obligations and requirements of your state or any other state in which it has a record?
  • Does your credit union regularly review the controls and security of third parties housing your data?
  • Does your credit union have mechanisms in place to detect and react to potential Denial of Service attacks?